While many people believe and agree that our Indian economy is very robust, dynamic and one of the fastest-growing economies in the world, all these are true. What is also true is that as much as we are growing and have a very vibrant domestic economy, we are missing the bigger picture, which is the global economy. The global economy is almost 95% or 96% outside India, and we are about 3 or 4% of the global economy, which means we are missing out on 95-96% of the global opportunity.

What is the meaning of global opportunity?

Number 1, outside our borders. There are economies, there are companies, there are brands and there are businesses that don’t necessarily exist in India. A classic example is the Apple brand. It’s a global favorite product, global favorite brand, but it’s domiciled out of the US.

There are also other very important tech companies like Google or Meta. What this means is that, while we may have great services and software and product companies in India, we are missing out on the big picture of those big global giants, where the only way you can get exposure is when you consider investing outside India.

Having said that, we have to also dig a little deeper to understand what is happening right now in India. Many of us are traveling abroad much more, many of us have a need to spend internationally either for some of our software or subscription, even to send our children out or to buy products and services that are not available in India.

When you do that, you are actually participating or spending your money in a global environment whereas if you are not investing outside, you are missing out. You are spending externally but not investing likewise. There is the need to keep your money in line with this.

Why should one invest outside India?

What we traditionally do is that our investment portfolios are by and large in the domestic local markets and we center around whatever we are doing over here within India. Whereas when we go outside the country and invest, we are letting our portfolios be diversified just beyond our own domestic Indian markets.

Now we are actually letting our portfolio access to different markets, to different economic cycles, industries and companies worldwide. There are a lot of advantages to that, we began by understanding diversification. We also have to understand the risks that are associated with being only in India and only a single market. When you invest globally, your risk kind of negates because there is a negative correlation between Indian investing and global investing.

Number two, you are now diversifying at another new level which is one country versus another country. Also, you are getting access to opportunities that do not exist in any form in India.

So that gives you kind of an opening. As we go further, one would realize that when you diversify, the point of diversification is to reduce your risk and optimize your return. By investing outside India, you get a chance to reduce your risk.

In some cases, you also have a play on currencies. For a typical Indian investor, we have been slightly on the positive side enjoying the benefit as an investor in a depreciating rupee. But as a consumer, the depreciating rupee is hurting us because the dollar is strengthening. When you are an investor, you are able to at some level counterbalance the rupee-dollar activity of appreciation or depreciation. A classic case in point is that if you had invested in international assets, apart from the international asset giving you a yield the last 10 years, the dollar has appreciated almost 3-3.5% on a year-on-year basis, therefore giving it an additional hedge and additional return because of rupee depreciation and dollar appreciation.

How can one invest globally?

There are other important aspects of global investing which are prevalent today. Earlier, these were all very difficult to invest in. Today, you have many funds, both to invest directly overseas or to invest from India through the domestic route overseas. In India you access plenty fund of funds(FoFs), some of the funds access various segmented global market ETFs or funds.

Thanks to the robust Fintech industry in India, you have many new technology providers offering solutions where you can access your broking and trading account internationally, whether it’s a stock whether it’s a fund, or whether it’s a company directly. You are allowed direct access to invest in these international equities or international securities.

For people who were initially not investing globally or globally being diversified, this is no longer an excuse because you have a lot of convenient tech platforms.

What are the geopolitical risks one can be prone to?

There will also be some bit of currency risk your portfolio will be prone to. You also have to understand that domestically you may be knowing more about the domestic markets than the international markets. So there will be a little bit of information lag or asymmetry though there’s a lot more tech support for you these days.

Therefore, you have to also know both the advantages and the disadvantages. Though the advantage is a bigger scale, different cycles, different markets, different economies, and different currencies, the con will be that sometimes you may not be on top of things like you are in a domestic market.

All in all, we have seen as a proven fact over the last 5, 10, 15 years that international investing is not anymore a fad. It is an important and integral part of investing for an investor if the risk-reward so suggests. Therefore, if you are someone who’s been enamored by these global brands and companies, remember it’s just not about getting carried away. These are great and credible investment opportunities for you to consider to build your portfolio.

https://www.financialexpress.com/business/investing-abroad-tips-for-indian-investors-looking-to-invest-outside-india-3271854/